02353cam a22002777 4500001000700000003000500007005001700012008004100029100001900070245009900089260006600188490004200254500001600296520111700312530006101429538007201490538003601562690005601598690009001654690011701744700002001861710004201881830007701923856003802000856003702038w11244NBER20150303174202.0150303s2005 mau||||fs|||| 000 0 eng d1 aYang, Ya-Hwei.10aDeflation and Monetary Policy in Taiwanh[electronic resource] /cYa-Hwei Yang, Jia-Dong Shea. aCambridge, Mass.bNational Bureau of Economic Researchc2005.1 aNBER working paper seriesvno. w11244 aApril 2005.3 aFrom 1999 to 2003, Taiwan faced a deflationary situation. The reasons for this deflation can be attributed to both domestic and global factors. Domestic changes including local political unrest, tensions with China, outbound investment to China, a weakened financial system, and a deteriorating government financial situation, provided the backdrop for the economic slowdown and corresponding deflation. A number of global factors, especially the bursting of the Internet and IT bubbles in late 2000 and the rise of China's economy, also heavily influenced both global and Taiwanese prices. This paper adopts a simplified aggregate demand and aggregate supply model to derive a deterministic equation of the GDP deflator (PGDP), and then applies quarterly data covering the period from 1982 to 2003 to estimate the PGDP equation using 2SLS. The empirical results are used to identify the sources of PGDP deflation in Taiwan. In addition, the phenomenon of price divergence appears since 2002 where the WPI increased and the CPI decreased. The causes of the WPI-CPI divergence are also investigated in this paper. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE0 - General2Journal of Economic Literature class. 7aE3 - Prices, Business Fluctuations, and Cycles2Journal of Economic Literature class. 7aE5 - Monetary Policy, Central Banking, and the Supply of Money and Credit2Journal of Economic Literature class.1 aShea, Jia-Dong.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w11244.4 uhttp://www.nber.org/papers/w1124441uhttp://dx.doi.org/10.3386/w11244